Moneymaking opportunities abound for factoring brokers and cash flow consultants. A factoring broker locates a business in need of account receivable funding and earns a commission for matching this business with a Factoring Investor.
Commissions are paid to the Broker by the Factoring Investor for closed transactions. While commission rates and structures vary, a broker can typically earn a commission between 5 and 15 percent of the Factor’s discount.
For example, if a business factors $25,000 worth of invoices and the Factoring Investor charges a 5 percent discount the Factor earns $1,250 ($25,000 x .05). If a commission rate of 10 percent is paid to the Factoring Broker then they earn a finder’s fee of $125.00 ($1,250 x .10). This type of commission is generally paid when the Factor receives payment on the invoices.
Another method of calculating commissions is based on the face value of the invoices rather than the Factor’s discount. The Factoring Broker would earn an average of one-half percent to 1.5 percent of the invoice amounts. For example, if the commission rate were 1 percent and $25,000 worth of invoices were assigned; the commission to the Broker would be $250.00 ($25,000 x .01). This type of commission is usually paid when the business receives their advance.
A Factoring Investor typically honors the payment of commissions to the Broker on all future advances with the same business client. This is a great source of future residual income since many businesses use factoring on a regular ongoing basis.